Contractors, engineers, sales companies, financial services–I’m talking to you!
By Shawn Sinclair Smith, president and founding director of Siviniti
Shortly after our company, Pure Energies, was acquired in 2014 by NRG Energy, one of the buyer’s executives said, “We are going to wait for SolarCity to implode after the ITC runs out and take over as the king of solar!” There were several fundamental flaws in this business plan, and they began to play out quickly. Make no mistake, I had a great deal of respect for the NRG executive team and was certainly inspired by their passion to make the world a better place while risking $1B of stockholder money to do so. ($1B is the estimated figure of all acquisitions and expansion costs approved by the board.)
Following Elon Musk and SolarCity has been the demise of many organizations. Musk is a brilliant mind. He thinks creatively on several different levels simultaneously and knows well how to leverage investor funds to build and experiment while keeping everyone waiting for tomorrow. But, and hold on to your seat, he built a terribly flawed model.
This is not to say the model doesn’t work for him—it very well may play out eventually. But his model does not work for you. We have just witnessed another major bankruptcy of a great and passionate organization determined to follow SolarCity’s fully-integrated approach to customer acquisition and fulfillment. I realize Sungevity, SunEdison, Sunrun, (add your company here) and Vivint feel they built their own model and passionately believed it would earn out. I shook my head a few days ago when I read a story online asking if Sungevity would have fared better focusing on lead generation. No kidding! Sungevity might still be in business if it followed what it did best and didn’t get bogged down integrating every other aspect of the business, including construction.
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Image courtesy of NREL
Construction has always been in my blood. My family runs a successful U.S. concrete construction company, and I spent part of my career deeply engaged in concrete and steel sales and implementation. If American clean energy leaders were in the concrete business, we would see companies that did not just pour concrete, but would also be determined to own the concrete manufacturing plant, the trucks to move the materials, the steel plant manufacturing the rebar, and the railroad and trucking companies transporting all the materials, while running in-house structural engineering and architecture, and staffing thousands of door-knocking cowboys to get customers. All of this would be built before any money was made. This is the reality of the American clean energy industry, and it is broken.
Subcontractors make the U.S. construction industry more efficient and cost-effective. Without subcontracting, building a small house would take years instead of months. Although solar and energy efficiency are part of the construction sector, many companies follow construction business models that do not allow for a sub, and small, simple jobs take several months to complete.
My takeaway? Let the real contractors do their jobs.
I heard someone say the fastest, most efficient solar installers were a mom and pop in the shop and their son on the roof. Bingo! We need to learn more from these hidden experts and set true efficiency in motion.
My colleagues and I at Siviniti have seen many clean-space companies make poor decisions and drive themselves out of business. It seems very clear why we keep seeing closures and bankruptcies from coast to coast—many companies are doing the wrong jobs, or, more plainly stated, are doing EVERY job wrong. Early advice told me to “focus on the one thing you do best.” Such a simple concept, but one that is often ignored in the clean energy space.
Whoever you are, you are not Musk. Your investors or your bank do not care about 20 years from now, they want short horizon gratification, and rightfully so. Solar is a construction business. It is meant to be profitable, it is supposed to support your family, and it should never be integrated to the point you cannot unwind. Stop worrying about the giant and focus on what you do best. After all, Home Depot did not kill Ace Hardware as many predicted. Ace knew its place and stayed true.
Sivinti is dedicated to strategy and innovation for companies engaged in energy efficiency. We focus our efforts on helping companies do what they do best and, for the sake of their employees, stay out of areas they don’t belong.
In future articles, I’ll provide insight on how to run your best solar company that doesn’t model business after the general media’s shining star.
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Shawn Sinclair Smith is the founding partner of Siviniti, a strategy and innovation consulting firm, working with client companies throughout the Americas. He is an entrepreneur, public speaker, author and father to three expensive teenagers. Follow him on LinkedIn.
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